Temple University’s Professor Bruce B. Rader Analyzes Patriot Coal
Bruce B. Rader received his Ph.D. in Finance in 1995 from the University of Houston. He is a Chartered Financial Analyst who has been an Assistant Professor of Finance at Temple University for the past 17 years. Before joining Temple’s Fox School of Business he worked as a Civil Engineer, Institutional Fixed Income broker and as a consultant. In addition he is sought after for financial and economic commentary by the Philadelphia media market for his insight on current financial market and economic conditions.
Rader’s report follows.
Designed to Fail
The Case of Patriot Coal
A New Moral Hazard
During the financial meltdown of 2008 and 2009, the term “moral hazard” was frequently in the news, often attached to a headline with some variation of the question “Is capitalism dead?” The issue posed five years ago was: Does capitalism work if firms, such as banks and insurance companies, aren’t allowed or are too big to fail? In this paper, I discuss another threat to capitalism, a moral hazard of a different sort. I am referring to firms that are created to fail as a means of wiping out liabilities and responsibilities to employees and retirees. In particular, I focus on a five-year old company, Patriot Coal, and the companies that created the Patriot spin-off and scheme.
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